Business Society and Governement

Ceola Farmer

Professor Riley

MGMT 4500

July 6, 2016

Assignment 1

A top 10 Fortune 500 company in 2013, General Electric is expected by many to display significant responsibility towards its surrounding environment and society. Taken over by John Francis Welch in 1981, GE developed from a profitable manufacturing company to an immensely profitable company that revolved its activities mostly around the provision of services, during his 20-year tenure. Even though a corporation has a number of duties it should carry out in order for it to be considered responsible and GE had many. The fact remains that its first and most important duty is to be as profitable as possible, thus, the Welch era GE did fulfill its duty, although certainly not entirely or up to the best of its capabilities. This is exemplified by the fact that, by the end of his tenure, earnings per share raised from $0.46 to $1.07 in the 10-year period following his retirement, the same earnings decreased by 54%. One of the main issues Welch’s critics have with his leadership methods refer to the losses of jobs that occurred while he was the CEO of the company, around 120,000. However, these were the result of his emphasis on efficiency and performance as well as a global approach to business that would reduce production costs. Given a highly competitive marketplace, his actions should certainly be understandable.

Undoubtedly, the demeanor GE displayed under Welch can be perceived as an expansion of Milton Friedman’s theory stating that a company’s only responsibility is to optimize profits while obeying the law. Friedman states that businessmen who claim a business has “social conscience”…“are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.” According to him, executives are held responsible only to those who employ him, and those who own the corporation. While GE’s actions have not been necessarily restricted to this, this point of view has certainly been prioritized. While excelling in some aspects, it seems evident that General Electric could have aligned itself more closely with the general guidelines for social responsibility. Jack Welch managed to maximize the most important principle; that is, maximizing its profits. Likewise, while it seems that during his years leading GE, the company committed numerous violations of the law, these wrongdoings are inevitable given its size. However, GE did not respect its responsibility to correct the adverse social and environmental impacts it caused. Its release of enormous quantities of polychlorinated biphenyls—proved to cause cancer—in the Hudson River, followed by Welch’s refusal to address the issues by implementing an expensive cleanup plan, leaves a dark stain on the company’s CSR efforts.